Benefits from oil will not be seen before 2025 – Jagdeo
Opposition Leader Bharrat Jagdeo on Wednesday evening cautioned stakeholders against the “rosy picture” Government is painting of Guyana’s economy in the immediate years post oil production.
“Even the oil companies, because they talk to me, they don’t have such a rosy picture of the fortunes of Guyana changing drastically, dramatically in the timeframe that we think it will happen. It will happen but it will happen not from 2020 to 2025, those will be rough years for us… There is a timeline to all of these things, it’s not going to happen immediately,” Jagdeo said while addressing a gathering of mostly Private Sector representatives at the Georgetown Chambers of Commerce and Industry (GCCI) Annual Awards and Dinner Gala.
Guyana is now home to the world’s biggest new deep-water oil discovery and with principle explorer ExxonMobil pushing for the development of the oil reserves, production is scheduled to begin in early 2020 or possibly late 2019. Only last week, the US oil giant announced its 10th discovery, reinforcing the country’s potential to be able to produce more than 750,000 barrels of oil daily by 2025.
In fact, Finance Minister Winston Jordan has stated that Guyana is set to earn some US$300 million annually when production commences at Exxon’s Liza 1 well in 2020 at an expected 120,000 barrels per day.
However, Jagdeo, a former Finance Minister himself and Head of State, pointed
out that this US$300 million oil revenue will be insufficient, especially against the backdrop of the losses the country has suffered.
“When oil prices were higher at U$120 per barrel, we were US more than US$300 million to pay for oil than when it fell to US$30 per barrel… So that is the reality [and] how do you deal with that. So US$300 million comes in per year… [but] what happens to the jobs? One thousand new jobs in the oil sector but we lost 30,000 jobs already and where are the efforts to create jobs?” he questioned.
Furthermore, the Opposition Leader posited that Government may not even to use the earnings from oil revenues since they have racked up domestic borrowing since 2015 to over 370 per cent.
“We have borrowed over US$500 million from the local banking system, that’s two years of Exxon’s money… because its short-term borrowing, the first two years of Exxon’s money goes towards repaying those debts,” he stated.
Nevertheless, the former President posited that while the impending oil and gas sector presents a “massive transformational opportunity” for Guyana, citizens must be realistic when it comes to expectation post first oil.
“So the US$300 million: if we use some to pay the debt, some to save for inter-generational equity, some for macro-economic purposes and some for infrastructure then that’s it; it’s gone. How does it changes everything else and that is what we ourselves have to [ask] or we would be grossly disappointed and then we would start complaining again. We have to have a realistic picture because of what they are doing now; because of their entire approach to management that they are setting us up for long-term or medium-term problems,” the Opposition Leader asserted.
Jagdeo, also an economist, contended that he nor the People’s Progressive Party (PPP) are not being negative on what is to come but are rather worrisome over this approach being adopted by the coalition Administration.
“So this is what bothers us a lot. It is not because we want to be negative that we’re criticising the Government. We are very, very worried about the future. So when I hear about this rosy picture that’s painted in the post 2020 period, it doesn’t accord with the reality of our finances and where we’re going and the approach of this Government.”
According to Jagdeo, in spite of all the talk of avoiding the ‘Dutch Disease’, Government has already fallen prey to it in almost every other sector in the economy.
“We’ve seen a drastic change in their fortunes; no help to stimulate the rice sector except more taxes; sugar is on the decline; the small miners, look at their declarations now; no help for them but increases taxes on machinery and equipment; forestry sector is in trouble too. Even construction is practically dried up in many parts except for those relating to oil and gas, retail has shrunk… And the Government pays no heed to stimulating those sectors and just raising expectations unduly,” the Opposition Leader insisted.
He continued that the this approach by the coalition Government will see Guyana returning to the same “economic philosophy” that led the country practically to bankruptcy – out of which they had to work to return the nation to viability today.
“There has been absolutely no help to industries, a loss of welfare, we’re spending on consumables, we’re borrowing more and we’re taxing more; and all of this will run out sometime in the future. We’re still living on past investments, no new big investments in this country except those relating to oil and gas industry,” he posited, adding that even ExxonMobil begun exploration under the PPP Administration.